James Daley

By James Daley

When you're buying a car insurance policy, it seems perfectly reasonable that you might be charged more if you recently had a crash that was your fault, or if you live in an area where car theft is rife. But the way that insurers price risk in Britain is so sophisticated that it takes into account all sorts of other factors which are arguably not particularly fair on the customer.

If you have an accident that wasn't your fault, some insurers will increase your premium regardless - justifying their actions by pointing to the statistics. Apparently, people who are involved in car accidents - even accidents which are not their fault - are more likely to be involved in accidents in the future. Understandably, however, anyone who's been involved in an accident that wasn't their fault feels aggrieved if they see their own insurance premium go up the next year. But it happens all the time.

Black balled for saving your insurer money

Similarly, if you scratch the side of your car, and decide to call your insurance company to clarify your excess - this can also be held against you, even if you decide not to make a claim. Insurers make the point that if you're the kind of driver who scratches their car, the chances of you doing some more damage in a more serious incident are higher. Whether you claimed on your policy or not is irrelevant - it's the detail of the incident that is of interest to your insurer. Worse still, if you don't explicitly tell your insurer about such an incident - a note can be added to the Claims & Underwriting Exchange database, saying that you withheld information - a black mark on your file which can dramatically increase the cost of insurance for you in the future.

Another favourite anomaly of mine is how insurers price differently based on what you do - or don't do - for a living. While it seems reasonable for an insurance company to give you a higher premium if you're in a job where you drive everyday, why is someone's occupation relevant if they work in an office to which they travel by bus? And why should someone who categorises themselves as unemployed be charged more for their insurance than someone who describes themselves as a homemaker?

The justification always goes back to the data. But surely, as a society, it's time we had a debate about what information it is fair for insurers to use, and which information it isn't.

Restraint on use of genetic testing

In the life insurance industry, there is an active debate around whether or not insurers can use the results of genetic testing to set premiums. And as things stand, there is an agreement that the results of predictive genetic tests cannot be taken into account on any policies worth less than £500,000. Above that, insurers can only ask you to reveal the results of predictive genetics test if you have had one for Huntingdon's disease (due to the high probabilility of this being right).

If we are having a debate about genetics, why can we not also have it a debate around the use of other pieces of information? Two years ago, the European Union forced British insurers to stop taking gender into account when pricing insurance. This seemed an odd decision given that there are very clear differences in the frequency and cost of car insurance claims between the sexes. But now that this has been forced on the industry, it's time to look at the rest of the information that is used.

One relatively extreme solution would be to change our insurance system to be more like the one that operates in most European countries - where the car, rather than the individual, is insured. Insurers claim that this would make insurance more expensive for everyone - and maybe they're right. But it's time an analysis was carried out and the evidence was laid bare.

Until we have a transparent insurance system, where the customer understands clearly how their premiums are being set, we will only encourage people to withhold information, and will never rebuild the trust between insurer and customer which is so severely lacking today.